Finance in Focus

In this season of transitions for some, and travel for others, we wanted to share a few tips relative to employee compensation and reimbursement that might help you as you work with your paid staff and volunteers. Should you have any questions on your operations, or want more information to assure you are in compliance with IRS regulations, please let us know. Some highlights include: proper employee reimbursement process, documentation for mileage reimbursements, sales tax reimbursements, and the new implications of moving expenses paid to employees.  

  1. Reimbursing expenses (think reimbursing pastors and paid staff for out of pocket expenses and/or trip costs) that are not requested within a reasonable period of time results in a direct violation of an accountable reimbursement plan. When an accountable plan is violated, it automatically becomes non-accountable, and should be paid as TAXABLE compensation to the employee. 
    • What’s a reasonable timeframe? The IRS allows for a maximum of 90 days, if defined in a policy by the local organization. However, the general time frame is no longer than 60 days. 
    • We suggest that a good rule of thumb is to make sure receipts and requests for mileage reimbursement are made in the month following the expense or trip. If you are reimbursing items that date past 60 days old (and don’t have an official policy allowing for up to 90 days), you should report that as taxable income on a W-2 at year-end. Timeliness for the sake of accountability is the key.
  2. Mileage reimbursements must include a date and purpose AND the actual number of miles traveled. The IRS sets a mileage rate allowed to be reimbursed tax free and it is important to show how many miles were included in the trip to ensure the reimbursement is tax-free. A good practice is to request start and end mileage on the form so actual mileage is calculated and not just estimated. 
  3. Be sure you are avoiding sales tax as regularly as possible in your reimbursements. As key representatives of the organization every effort should be made to be wise stewards of the organization’s assets, and that includes using Sales Tax exempt certificates whenever reasonably possible. We recognize this is not always avoidable and we discourage nickel and diming your reimbursements, especially for volunteers. The point is to make every effort possible, proactively, to avoid needing to reimburse and/or pay for sales tax.
  4. Effective January 1, 2018 moving expenses are no longer allowed to be paid on a tax-free basis by an employer. Any moving expenses, paid directly by a church or reimbursed by the church to a pastor (or other employee) should be considered wages and added to the W-2 at year-end.

We hope these specific tips are useful in tightening up your financial processes. Again, should you have questions or want guidance in implementing some new policies, we are available to resource you. Please contact our Finance Director – Honna Curtis – and she will be happy to help. 

I hope you have a great summer!

Rev. Scott F. Sittig

Treasurer, Genesis Conference